July 23, 2015

After an all-night session, early this morning the parliament of Greece voted to accept the reforms needed to receive a financial bailout from the European Union (EU). Despite the reservations held by many Greek lawmakers concerning the package, Prime Minister Alexis Tsipras managed to convince a majority of them that accepting still more cuts to the budget was worth it to stay in the EU and the eurozone.

Outgoing Greek finance minister, Yanis Varoufakis (left), speaks as the new finance minister, Euclid Tsakalotos, listens during a hand-over ceremony. Varoufakis resigned after a July 5 referendum held for Greek voters. Credit: © Ververidis Vasilis, Shutterstock

The new bailout plan is expected to provide Greece with some 86 billion euros ($60 billion) over the next three years. But the Greek government is asked to implement tax increases, further reduce pensions to retired Greek citizens, and sell assets owned by the Greek government to the private sector. The EU will now begin debating the bailout, but it is expected that it will soon make the loans so desperately needed by Greece.

Few economists are hopeful that this latest bailout will be a success. The thing that would help Greece to pay off its debt and become economically independent would be to grow its economy, measured by its gross domestic product (GDP). Over the last five years of austerity packages, the Greek economy has contracted by 25 percent.

Ordinarily, a country in the economic turmoil that Greece is in would cause its currency to become less valuable. Currency devaluation would be of great help to the Greek economy. It would make Greek-produced goods that could be sold as exports to other countries more affordable. This would increase the production of goods and help the economy. Devaluation would also help to make tourism to Greece more affordable. But, because Greece is in the 19-nation eurozone, its currency is of the same value as in all the other eurozone nations. It cannot be devalued. If the Greek government could increase certain types of spending, that spending might also boost its economy. But, EU austerity prevents that road to economic growth as well. Greece is boxed in for the foreseeable future.

Earlier this week, the banks reopened in Greece, but strict regulations on how much currency can be withdrawn per day are still in place.

Other Behind the headline articles: 

• A Greek Tragedy (July 16 2015)
• EU agrees to bailout terms for Greece (July 13 2015)
• Greece Votes Oxi! (July 6, 2015) 
• Greece Closes Banks, as Economic Crisis Escalates (June 29, 2015)